Virginia has the Ninth Lowest State and Local Tax Burden in the Nation for FY 2016

Mar 25, 2018

In Fiscal Year (FY) 2016, Virginia collected $38.5 billion in state and local taxes—or $4,574 for every man, woman, and child. While this is an impressive sum of money, it tells us little about whether or not the average Virginia taxpayer can afford this level of taxation?

To better answer this question, this analysis will calculate Virginia’s tax burden relative to the private sector. Ultimately, it is the private sector that creates new wealth and income. A high tax burden means a state is hobbling its private sector relative to other states and reducing their long-run economic growth potential.

Fortunately for taxpayers, as shown in Chart 1, Virginia’s state and local tax burden (tax collections divided by private sector personal income) was the ninth lowest in the nation for FY 2016 at 12.6 percent—or -12 percent below the national average of 14.3 percent.

Virginia’s lower than average state and local tax burden is driven by a low corporate income tax burden (0.2 percent, 10th lowest), and low sales tax burden (1.7 percent, 6th lowest), but that is partially offset by other taxes such as the high personal income tax burden (4.0 percent, 12th highest)

Of course, the tax burdens for local government can vary just as much as they do among the 50 states. As such, we have also calculated the local government tax burden for every county in Virginia—this includes every taxing jurisdiction within the geographic county borders whether it is a city, a special district, or county government itself.

The 20 Virginia counties/cities with the highest local government tax burden include:

The 20 Virginia counties/cities with the lowest local government tax burden include:

Gloucester County, VA (4.2 percent)

Charlotte County, VA (4.1 percent)

Isle of Wight County, VA (4.1 percent)

Powhatan County, VA (4.1 percent)

Brunswick County, VA (4.0 percent)

Chesterfield County, VA (4.0 percent)

Madison County, VA (4.0 percent)

Hanover County, VA (3.9 percent)

Greene County, VA (3.9 percent)

King and Queen County, VA (3.8 percent)

Floyd County, VA (3.7 percent)

Craig County, VA (3.7 percent)

Botetourt County, VA (3.6 percent)

Henrico County, VA (3.6 percent)

Clarke County, VA (3.6 percent)

Bedford County, VA (3.3 percent)

New Kent County, VA (3.1 percent)

Goochland County, VA (2.6 percent)

Amelia County, VA (2.5 percent)

Norfolk City, VA (-3,893.7 percent, see notes)

Note: The Bureau of Economic Analysis treats the larger independent cities as county-equivalents and merges smaller independent cities with the surrounding county. Due to Virginia’s unique classification challenges, we are unable to generate a county tax burden map.

Note: The tax burdens for counties (or independent cities) with large military bases, such as Norfolk and Prince George County, are inflated because, by definition, military compensation is excluded from the denominator as it does not constitute private sector activity. In rare cases, private sector is negative because of workers that live in other counties/cities.

Additionally, military activity often physically crowds-out the private sector pushing it out into surrounding areas. While a significant portion of surrounding private sector activity is due to the presence of the base, it is counted in the counties where the business is physically located. Thus, the tax burden, as a percent of private sector personal income, is overstated in counties with military bases and understated in surrounding counties.

J. Scott Moody

Scott has nearly 20 years of experience as a public policy economist. He is the author, co-author and editor of over 180 studies and books. His professional experience also includes positions at the American Conservative Union Foundation, Granite Institute, Federalism In Action, Maine Heritage Policy Center, Tax Foundation, and Heritage Foundation.